boomandbustinnetworkindustriesrisingfromtheashes（10页）.docVIP

Boom and Bust in Network Industries: Rising from the Ashes Dr. Allan Shampine, Lexecon, Chicago, USA Dr. Hal Sider, Lexecon, Chicago, USA ABSTRACT A number of authors have noted anecdotal similarities between the recent telecommunications boom and bust and historical booms and busts in other network industries.? We use historical data on infrastructure, prices and revenues to move beyond anecdotal comparisons.? We compare and contrast the boom and bust period in fiber optic networks with similar periods in older network industries – the railroad industry from 1870 to 1894, the telephone industry from 1894 to 1922, and the telegraph industry from the 1850s through 1897.? Each industry displayed significant early growth followed by fiscal difficulties and industry consolidation.? We then examine the periods after those earlier “busts” to shed light upon how the telecommunications industry may develop.? In each case, the earlier network industries had significant growth after the initial “bust” periods, while prices remained relatively flat.? The history of network industries suggests that the disappearance of many competitive carriers during the telecommunications “bust” may not be cause for concern. INTRODUCTION The telecommunications boom and bust of the late 1990s and early 2000s has been a popular topic in both the academic and the popular press (Couper, Hejkal and Wolman, 2003; Ofek and Richardson, 2002, 2003). While the causes and effects of the boom and bust are still being debated, there is no question that the industry experienced a dramatic period of growth followed by an equally dramatic decline. However, such boom and bust cycles are not unique to telecommunications, or to recent years. Like Ozymandias, great network booms and busts of the past tend to be forgotten under the sands of time. A few observers have noted that what fiber optic companies did from 1997 through 2003, telegraph companies did in the mid 1800s, railroad companies did